Renewables and Innovation Complementary Game Changers for System and Market

Renewables drive innovation, and renewables necessitate innovation:

The more RES we have in the system, the more the system has to be sophisticated, flexible, and responsive1.

High renewables penetration also requires generation and demand flexibility as well as system services (see box), since variability goes along with balancing. In addition, there is an issue with investment in the current setting: The increasing share of capital intensive and zero or low variable cost technologies (especially wind and solar energy) leads to many hours in the year with no revenues for any generation technology. Elements of answers are, according to ENTSO-E, to accept price spikes, but also revenues from system services or capacity mechanisms when present. That is why the European Commission envisages new legislation on market design and on how to best value flexibility, capacity and services in the market design.

Taking a view on the 2030 time horizon, we expect the share of renewable energy sources to grow beyond 45% of the total annual demand2. In addition, we will see an increasing impact of decentralised generation and self-consumption, large-scale roll-out of smartmeters, and growing energy efficiency, also thanks to the electrification of heating and transport.

By ‘system services’, we mean all those services that TSOs need to keep the power system stable and reliable at all times. These include not only ancillary services such as blackstart capability (the ability to restart a grid following a blackout); frequency response (to maintain system frequency with automatic and very fast responses); and fast reserve (which can provide additional energy when needed), but also the provision of reactive power for voltage stability, transient and dynamic stability, inertia, faultlevels, power flow limits, (n-1) security, etc.

To keep the system in balance, demand must become more flexible. However, if this flexibility was imposed on the customer, quality of life and industrial and commercial productivity could suffer greatly. Fortunately, information and communication technology (ICT) is providing tools to empower customers to make their own choices about how flexible their demand is. Large industrial and commercial customers can continuously manage their consumption and also their system services offerings as functions of relative price and value.

Alternatively,they can set parameters once in a while and leave the continuous management to a service provider or their electricity supplier. Through these choices and parameters, customers are managing their demand much more actively than in the past, telling their service provider or supplier which use of electricity and – in the future, perhaps – even which appliance is worth what price to them. Since this worth changes with the time of day and many other parameters, the smarthomes, businesses and industries of the future will send signals about the value of electricity to suppliers and third party service providers such as aggregators by the billions each day.